Question

Irene’s Dairy is deciding whether or not to enter the market for ice cream, currently monopolized by Mattie’s Ice-cream. If it enters the market, Mattie’s can either accommodate him and share his 10million in profits equally with Irene or fight him and cause a 5million loss for each in a price war.​ ​Given that Mattie could convincingly threatens to always fight, what would be Irene’s best response Group of answer choices

Answer 1

Group of answer choices:

Given that Mattie could convincingly threaten to always fight, what would be Irene’s best response

a. Not Enter

b. Run

c. ​ Hide

d. ​ Enter

Answer:

Given that Mattie could convincingly threaten to always fight, Irene's best response would be:

d. ​ Enter

Step-by-step explanation:

Irene Dairy should enter the market despite Mattie's threat to always fight. If Irene Dairy does not enter the market out of fear of Mattie's threat to fight, other firms are likely to enter and share the market with Mattie. Mattie should never be given the privileges of a monopolist. Irene Dairy should ensure that its ice creams are of higher quality and sustain the fight with Mattie, which cannot forever shed its profits in the name of fighting a competitor.